Upon announcing significantly higher results than analysts’ expectations for the fourth quarter, Airbnb’s stock skyrocketed more than 14% in after-hours trading, surpassing the $1600 mark. This success demonstrates the resurgence of the tourism industry after the pandemic downturn. Last year, European airports served a record 2.5 billion passengers – 1.8% more than in 2019, the last full season before the pandemic. Companies associated with the tourism sector, including Airbnb, are benefiting from this. Despite the impressive rise in stock, the company is still facing significant challenges – particularly in terms of competition from Booking, which boasts almost a double-margin.
Yesterday, Airbnb, the apartment rental platform, published its financial results for the fourth quarter. The company, once an icon of the sharing economy and a pioneer in the tourism industry revolution, had a very good period, thanks to favorable conditions in global tourism. After announcing the results, Airbnb’s shares increased by 15% in after-hours trading, signalling a significant resurgence after a period of stagnation. Earnings per share amounted to $0.73, while analysts expected $0.63. Revenue rose by 12% to $2.48 billion, exceeding the analysts’ forecast of $2.42 billion. The market received well improvement in efficiency, although it must be noted that the company still faces significant challenges.
Airbnb margin increased to 19% in the fourth quarter, up from the previous level of 15%, allowing the company to meet the industry average of 18.6%. However, its competition is performing significantly better. For instance, Booking has a margin of 31.2%, a mark Airbnb finds challenging to reach. We will find out Booking’s results for the fourth quarter next week. It’s estimated that in 2024, the company will generate revenues of $23.43 billion, up from $21.37 billion in 2023.
In 2024, Airbnb brokered bookings for 491 million accommodations and attractions, totaling a record $82 billion. It’s noteworthy that the company no longer reports the number of stays separately but presents collective data concerning stays and other offered activities to get investors to look beyond just the number of stays and consider the broader business model.
Investors positively assessed Airbnb’s recent quarter though the company will face many challenges and potential risks in subsequent periods. The issues include over-tourism, distinctions between it and the competitors, and stringent regulations that might hinder the company’s further growth, particularly if authorities limit short-term rentals. Cities like Venice, Dubrovnik, and Barcelona, already inundated with tourists struggle with infrastructure overloads and environmental degradation.
From an investor’s perspective, regulatory risks, further expansion, and the development of new products and services are crucial. Regulations on short-term rentals, which have been implemented in various American cities, Greece, and Spain, might significantly limit Airbnb’s operations. However, the company places hope in developing markets in Latin America and Asia, which might be significant sources of growth in the long term.
Undoubtedly, Airbnb’s results are an effect of the tourism market boom – travel is becoming more and more popular, exceeding pre-pandemic levels. Airbnb’s ability to consistently increase revenue will now depend on the company’s management. Improvement in margin last quarter gives hope in this area. Assisting this could be further fine-tuning of price-setting and matching algorithms to enhance profitability. However, the gap between Airbnb and Booking is still significant. The growing trend of long-term stays and the increasing number of digital nomads may be key growth drivers. Presently, reservations longer than 30 days constitute 17% of Airbnb’s total business. This percentage is likely to increase, marking the competition between Airbnb and Booking, and international hotel chains as a fascinating scenario which prompts discussion about the future of travel.
Paweł Majtkowski, eToro Analyst for Poland
Source: https://ceo.com.pl/turystyka-bije-rekordy-akcje-airbnb-o-14-proc-w-gore-59937
